Rail Privatisation: Refuting the Claims

8th May 2015 | Uncategorized

Following their unexpected victory at the 1992 general election, John Major’s Conservative government used its small majority to push its dogma-inspired policy of privatising Britain’s railways through Parliament. Conservative politicians habitually spouted optimistic claims and wild predictions as to the enormous benefits privatisation would bring but which have spectacularly failed to materialise. A selection of their most outrageous quotes is reproduced below.

The Claim:
Every privatisation has different aspects and takes a different form – from stock market flotations of whole industries to management buy-outs of small companies. Common to all is the harnessing of the management skills, the financial disciplines, the entrepreneurial spirit and the 25 efficiencies of the private sector, and the removal of the constraints of public sector ownership and its monolithic structures. British Coal and British Rail in their privatisations are likely to take different forms, but the objectives are clear. The time is right for British Rail and British Coal to go down that path and to reap those benefits. – John MacGregor, Secretary of State for Transport, House of Commons, 18 May 1992

The Reality:
This is Tory Party free market dogma in its purest and most blinkered form. Despite the government’s staunch belief in the unrivalled abilities of the private sector, numerous franchises have, perversely, been awarded to foreign publicly owned railway companies, whilst absurd legislation forbids the British public sector from bidding.


The Claim:
We shall expect Railtrack to recover its economic costs in providing and maintaining the railway infrastructure from the track access charges it will levy on future rail service operators. – Roger Freeman, Minister for Public Transport, House of Commons, 28 January 1993

The Reality:
Railtrack was dependent on huge taxpayer subsidies and massive borrowing, which ultimately led to its collapse in 2001.


The Claim:
We expect that the privatisation of BR will lead to an improvement in the quality of all rail services. – Steven Norris, Under-Secretary of State for Transport, House of Commons, 10 February 1993

The Reality:
This has not happened. Complaints about late trains, old and dirty trains, cancellations, rude staff, etc. are frequently made against the private train operating companies, while poor customer service by Connex led to the company being stripped of its South Central and South Eastern franchises in 2000 and 2003, respectively. Improvements to the railway infrastructure have resulted not from privatisation but from a huge increase in government funding.


The Claim:
Our proposals are intended to enable the railways to provide a higher quality of service, with greater responsiveness to customers’ needs, and to offer better value for money to the public who travel by rail. – Roger Freeman, Minister for Public Transport, House of Commons, 25 June 1993

The Reality:
Since privatisation, rail fares have consistently risen higher than the rate of inflation. Between 1995 and 2013, the average ticket price has increased by 22 per cent in real terms. The average season ticket has risen by 27 per cent since 2010. Rail passengers in Britain are now paying the highest fares in Europe, possibly the world.


The Claim:
As to British Rail, I think that she will find that, when it is operating as a privatised concern, as with the other privatised concerns, the service will be infinitely better than it was under nationalised control. – John Major, Prime Minister, House of Commons, 19 May 1994

The Reality:
The service is not infinitely better under privatisation. Complaints about late trains, old and dirty trains, cancellations, rude staff, etc. are frequently made against the private train operating companies, while poor customer service by Connex led to the company being stripped of its South Central and South Eastern franchises in 2000 and 2003, respectively.


The Claim:
Previous privatisations have consistently led to improved services for customers and greater efficiency for the industries concerned. The same will happen on the railways. – Roger Freeman, Minister for Public Transport, House of Commons, 20 June 1994

The Reality:
Services have not improved as a result of privatisation. Complaints about late trains, old and dirty trains, cancellations, rude staff, etc. are frequently made against the private train operating companies, while poor customer service by Connex led to the company being stripped of its South Central and South Eastern franchises in 2000 and 2003, respectively. As for greater efficiency, the organisational structure imposed on the rail industry to enable privatisation has made it significantly less efficient than it was under BR, increasing costs and resulting in greater than ever dependence on government funding and borrowing.


The Claim:
The Government believe that privatisation offers the best future for Railtrack, for passengers and freight and for train operators. It will allow greater use of private sector skills in managing the network, improving Railtrack stations, delivering efficient track maintenance and encouraging investment in the upgrading of railway lines. It will provide even greater scope for private capital to be injected into better facilities. Railtrack will be better able to deliver improvements in the service that it provides to operators and, therefore, to passengers. – Brian Mawhinney, Secretary of State for Transport, House of Commons, 24 November 1994

The Reality:
Railtrack was an unmitigated disaster. Severely criticised for its poor stewardship of the railway infrastructure following the fatal rail accident at Hatfield in 2000, it was put into administration the following year. For an infrastructure company, it had a conspicuous shortage of engineers on its board of directors and it often gave the impression of being more concerned with exploiting the value of its property than maintaining a safe railway.


The Claim:
We are seeking to move the railway industry to the private sector for the benefit of the consumer. – Brian Mawhinney, Secretary of State for Transport, House of Commons, 24 November 1994

The Reality:
As a direct result of privatisation, higher fares have left passengers worse off, while taxpayers are forced to contribute several times more in subsidies to the privatised rail industry than was granted to British Rail. British commuters spend over three times more of their salary on rail fares than most European passengers.


The Claim:
When Railtrack is privatised, we shall see what vigorous management and private capital can do to an industry, as has happened with British Airways, British Telecom and a string of other utilities and companies. – Nigel Waterson, (Tory) Member of Parliament for Eastbourne, House of Commons, 24 November 1994

The Reality:
Railtrack was an unmitigated disaster. Severely criticised for its poor stewardship of the railway infrastructure following the fatal rail accident at Hatfield in 2000, it was put into administration the following year. For an infrastructure company, it had a conspicuous shortage of engineers on its board of directors and it often gave the impression of being more concerned with exploiting the value of its property than maintaining a safe railway.


The Claim:
I am absolutely clear in my mind that when the railways are subject to the market, to competition and to the efficiency gains that will flow from the management and the investment that will be brought to bear in the private sector, the same result will accrue as has previously accrued with other transport industries. The result will be that passengers, those who wish to move freight and other train operators will see benefit for their customers. – Brian Mawhinney, Secretary of State for Transport, House of Commons, 24 November 1994

The Reality:
The organisational structure imposed on the rail industry to enable privatisation has made it significantly less efficient than it was under BR, increasing costs and resulting in greater than ever dependence on government funding and borrowing. Private sector investment represents just one per cent of the money going into the rail industry; the remainder comes from public funds or borrowing, which is underwritten by the government.


The Claim:
My Lords, at the moment, of course, the taxpayer pays everything for the railways. That is the historic position. As the noble Lord knows, we are now going forward to a position where we are putting the railway companies into the private sector. Once those companies are in the private sector they will be responsible for their own costs. – Viscount Goschen, Under-Secretary of State for Transport, House of Lords, 7 December 1994

The Reality:
Far from being responsible for their own costs, the private rail companies are very much more dependent on taxpayer subsidies than British Rail ever was.


The Claim:
Each privatisation has proved a success. The initial costs of past privatisations have been more than outweighed by efficiency and benefits, and that will be the case for rail users as well. – John Major, Prime Minister, House of Commons, 13 December 1994

The Reality:
On the contrary, the inherent inefficiency of the complex and fragmented structure imposed on the rail industry by privatisation has led to dramatically higher costs, negating any benefit the private sector could possibly bring.


The Claim:
As for the sale of Railtrack, there is no question of its assets being sold off cheaply. – John Major, Prime Minister, House of Commons, 28 November 1995

The Reality:
Railtrack had been valued at £6.5 billion but was sold for £1.95 billion. In addition, £1.5 billion worth of debts were written off to help the sale. The government’s failure to apply Public Accounts Committee recommendations to the sale process caused taxpayers to lose £1.5 billion. Following the sale, the company’s value rocketed to £8 billion. The conclusion must therefore be that Railtrack’s assets were sold off cheaply.


The Claim:
On a like for like basis, overall Government funding for the railways after privatisation is expected to be broadly similar to the levels of recent years. – John Major, Prime Minister, House of Commons, 19 December 1995

The Reality:
The privatised rail industry receives government funding several times higher than was previously granted to British Rail, needlessly depriving taxpayers of billions of pounds every year.


The Claim:
Those are the things that matter to the people who travel on the railway and, indeed, to the taxpayer who will now pay substantially less by way of grant or subsidy to the railway than he did before. – Viscount Goschen, Under-Secretary of State for Transport, House of Lords, 18 April 1996

The Reality:
The privatised rail industry receives taxpayer subsidies several times higher than was previously granted to British Rail, needlessly depriving taxpayers of billions of pounds every year.


The Claim:
I anticipate the level of subsidy will be about the same. It’ll then fall, because we’re getting better value for money from the people who bid for the franchises than we got from British Rail, so the taxpayer will eventually save money, not lose money. – Sir George Young, Secretary of State for Transport, speaking on ‘Panorama’ in 1996.

The Reality:
The privatised rail industry receives taxpayer subsidies several times higher than was previously granted to British Rail, needlessly depriving taxpayers of billions of pounds every year.


The Claim:
Rail privatisation is delivering and will continue to deliver enormous benefits for the travelling public. That means new investment, extra services, better customer care, tougher passenger charters and a much better deal for the taxpayer than was possible under nationalised British Rail. – John Bowis, Minister for Transport in London, House of Commons, 15 November 1996

The Reality:
While the standard of service has remained broadly the same, the taxpayer is significantly worse off as a direct result of rail privatisation. Private sector investment represents just one per cent of the money going into the rail industry; the remainder comes from public funds or borrowing, which is underwritten by the government.


The Claim:
The long-term savings from privatisation will be substantial; after seven years, the subsidy for the 20 franchises that we have let will be less than one third of that required by British Rail in 1995-96. We are, therefore, getting a better deal for passengers, at less cost to the taxpayer. – Sir George Young, House of Commons, 10 February 1997

The Reality:
As a direct result of privatisation, higher fares have left passengers worse off, while taxpayers are forced to contribute several times more in subsidies to the privatised rail industry than was granted to British Rail. British commuters spend over three times more of their salary on rail fares than most European passengers.


The Claim:
Benefits for rail users are being achieved at a decreasing cost to the taxpayer. In seven years time, the private sector franchisees will require only about 40 per cent. of the support that British Rail estimated they would have needed to run the same services this year. – Viscount Goschen, Under-Secretary of State for Transport, House of Lords, 25 February 1997

The Reality:
The privatised rail industry receives taxpayer subsidies several times higher than was previously granted to British Rail, needlessly depriving taxpayers of billions of pounds every year.


The Claim:
The fares will be lower, following privatisation, than they were before. – John Major, Prime Minister, House of Commons, 20 March 1997

The Reality:
Since privatisation, rail fares have consistently risen higher than the rate of inflation. Between 1995 and 2013, the average ticket price has increased by 22 per cent in real terms. The average season ticket has risen by 27 per cent since 2010. Rail passengers in Britain are now paying the highest fares in Europe, possibly the world.